Rhino Temporarily Idles CAPP Production

Aug 1, 2012

Zatezalo and Rick Boone, the company’s senior vice president and CFO, discussed the cutbacks and provided an updated operational report at Raymond James Coal Investors Conference in New York. They stressed the mine shutdowns, which affected about 200 miners, were temporary in nature. “We are fulfilling existing contracts in a cost-efficient manner,” Zatezalo said, adding the market downturn has affected all of the company’s operations in some way.

Added Boone: “We are going to ship all our coal.”

Least affected by the market downturn, Zatezalo said, are Rhino’s Hopedale and Sands Hill steam coal operations in Northern Appalachia and the Castle Valley complex in Utah, where longer coal sales contracts are in place. Hopedale is an underground complex near Cadiz, Ohio, while Sands Hill consists of two active surface mines in southeastern Ohio. Both produce high-sulfur steam coal. Castle Valley produces western bituminous coal and is comprised of underground mining assets in Carbon and Emery counties acquired by Rhino in August 2010 from C.W. Mining Co.

In Ohio, Rhino has received a conditional mining permit for its Leesville operation, which would be a “sister” mine to Hopedale. At Hopedale, Rhino is permitting a No. 7 seam reserve that would be accessed from the existing portal and infrastructure.

At Sands Hill, meanwhile, Rhino has acquired an estimated 2.5 million tons of underground reserves the company plans to bring on line in the future as the market improves.

Recently, Rhino purchased leasing rights to an estimated 30 million tons of high-sulfur reserves along the Green River in western Kentucky. Zatezalo said the company would develop the Pennyrile Energy reserves with an eye to the export market.

Zatezalo said Rhino also has proven up about 8.6 million tons of met coal reserves at its Rich Mountain asset near Elkins, W.Va. The 32,600-acre property was acquired last year.

Still on the drawing board is the proposed Taylorville underground steam coal mine in Christian County, Ill. The mine would be located at the site of a coal gasification plant Tenaska had planned for central Illinois. Earlier this year, however, Tenaska switched gears, saying it first wanted to build a natural gas-fired plant, with a coal gasification element possibly added several years later. Illinois legislators have not approved either plan, and Tenaska still is trying to decide whether to seek legislative approval in the General Assembly’s two-week fall veto session in November.

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